Conduct in Financial Proceedings & The Notorious "Add-Back" Argument

May 18th, 2018

A persistent issue in Family Law is whether a Court should ‘judge’ divorcing couples who come before them in relation to the way in which they have behaved during their marriage. Whereas the Court should not be seen to cast judgement, there are some occasions where it would appear more unfair not to do so. It is not difficult to imagine the scenario where a husband or a wife, faced with an impending divorce, spends extreme amounts of money in an attempt to reduce the ‘pot’ of finances which could be awarded to their former spouse. The question is, should this be taken into account by a judge when making a financial order? Should a party who has behaved reprehensibly be given a reduced award accordingly? This has been a contentious issue for the Courts.

S25 of the Matrimonial Causes Act (MCA) 1973 sets out the factors which a Court should take into consideration when deciding how to split the matrimonial assets. S25(2)(g) states; ‘the conduct of each of the parties, if that conduct is such that in the opinion of the court it would be inequitable to disregard it’. Usually, after making provision for each party’s needs, the Court will divide the remaining finances equally, however, weight will be attached to any conduct which is ‘both gross and obvious’,[1] thus ensuring the overarching principle of fairness is upheld. When making this assessment, a distinction is drawn between a person’s conduct in a financial and non-financial sense.

General Conduct

For non-finance related conduct, notoriously, those citing adultery as the fact which caused the irretrievable breakdown of their marriage (s1(2)(a) MCA) once would have had this taken into account. Traditionally, the adulterer was given a reduced financial award with regard to this section; the justification being the sanctity of marriage which must be preserved. Thus, Courts would reduce the awards granted with the intention of deterring other potential adulterers.

These days there is a much higher threshold and, to affect an award, a person’s general conduct must be shocking. Cases where the award has been reduced are very rare and usually confined to their own facts. In one, a wife wished to inherit her husband’s entire estate so that she could move her new lover in. The husband was severely depressed and she assisted him in committing suicide. The suicide attempt was unsuccessful, but her award on divorce was significantly reduced due to her heinous actions.[2]

In another case, the husband attacked his wife with knives in front of their children - for which he was sent to prison. The Court took into account this conduct when dividing the finances, of which his award was then reduced.[3]

On the other hand, the type of general conduct which may be considered is not always negative, and good conduct can increase an award just as bad conduct can reduce one. In A v A (Financial Provision: Conduct),[4] the husband gave up his job and made no effort, however the wife worked hard in the evenings whilst undertaking a University degree. The Court considered their respective conduct and awarded the wife a greater amount.

Financial Conduct

Financial conduct is a different matter. On rare occasions a Court may, after making provision for the needs of the respective parties, consider financial misconduct where one spouse has dissipated the assets for example by gambling, purchasing expensive goods or services or investing money irresponsibly. In these cases, there is an option available to the Court to ‘add-back’ those spent finances, treating them as though they were still held by the party. This, nevertheless, is not an easy argument to succeed with.

The difficulty can clearly be seen with the recent cases of Rapp v Sarre [2016] EWCA Civ 93 and MAP v MFP [2015] EWHC 6275. In Rapp, the husband had spent a significant portion of the matrimonial finances on his involvement with drugs and prostitution immediately before the divorce proceedings. The Court ultimately split the finances, awarding more to the wife, on the grounds of her needs but commented that, had her needs not required more, the husbands conduct would have led them to make the same departure from equal division.

Contrarily, in MAP, the wife’s argument for a £1.5 million add-back, being the amount she put forward as the husband’s expenditure on credit cards, drugs, a stay in a drug rehabilitation centre and on prostitution, was rejected by the Judge. Interestingly, Moor J, although finding that the husband had overspent significantly, found that the monies spent were not wanton and so could not be added back; conversely, they were simply part of the husband’s flawed character and, as such, a spouse must take their partner as they find them. In this way, unless spending is reckless and carried out with the intention of maliciously reducing the matrimonial pot, it cannot form part of an add-back argument.

Overall, this is clearly not a cut and dry issue. On the one hand, fairness dictates that the finances should be divided equally after needs have been met whereas, on the other, allowing a former husband or wife to recklessly spend their money so as to reduce the financial reward for the other party sets a worrying precedent and is certainly not fair for the spouse who has behaved reasonably. Malicious frittering away of finances, however, may only occur in the most bitter of divorces, as spending the matrimonial money is clearly a double edged sword in that the spending party will also lose some of what they could have been awarded.

At Hawkins Family Law, we always advise our clients to be fully cooperative in the Court process; to act reasonably and help prevent any further tension in a situation which we understand may already be extremely challenging. To take your first steps towards specialist advice, give us a call on 01908 262 680 or email enquiries@hawkinsfamilylaw.co.uk

Written by

Holly Mullen

PA

Having recently graduated with her first class honours degree in law from the University of Bedfordshire, Holly is keen to explore her interest in Family Law. She has previously volunteered with public legal advice services and hopes to eventually qualify as a family Solicitor. Holly joined Hawkins Family Law in August 2017.

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